- General Statutes 143B-426.39
- GASB Statement No. 24 (GASB 24)
- GASB Statement 33
See Nonexchange Transactions, and Financial Reporting for Certain Grants and Other Financial Assistance for related GAAP issues.
Grants, entitlements, and shared revenue are accounted for and disclosed based on GASB 33 and GASB 24. A grant is defined as a contribution or gift of cash or other assets from another government to be used or expended for specific purpose, activity, or facility. A grant can also be either operating or capital depending on the specific intent. Each grant must be evaluated to identify what criteria establishes the specific purpose, activity, or facility. These criteria become the measure of compliance that must be adhered to by agencies handling and agencies receiving the funds. These criteria will usually be restrictions imposed by the state and/or federal government, contractual obligations, and fiduciary covenants.
As required by generally accepted accounting principles, all financial units of the States reporting entity must report grant activity in their financial statements.
Legal compliance may impact the accounting of grant funds. The type of fund used to account for the grant or grants is in a large part determined by the amount of monitoring required in the grant contract or other restrictions.
GASB 24 specifies the use of an agency fund to account for grant funds only when the recipient government functions as a cash conduit without having administrative or direct financial involvement in the program. GASB 24 notes that administrative involvement is demonstrated by:
- Monitoring secondary recipients for specific compliance requirements,
- Involvement with determining which secondary recipients are eligible for grant payments,
- Exercising some discretion in resource allocation.
A direct financial involvement is demonstrated by:
- A requirement to supply matching funds,
- Responsibility for disallowed costs.
GASB 24 also specifies that on-behalf payments (payments made by one entity for another) for fringe benefits and salaries be recognized as a grant to the extent the entity is legally responsible for the payment. Legal provisions are defined as those arising from constitutions, charters, ordinances, resolutions, governing body orders, and intergovernmental grant or contract regulations.
As noted in this section, implementing GAAP for grant reporting requires evaluation of the grant at all compliance levels.